CHENNAI: NCLAT’s Tuesday ruling that spectrum licences cannot be transferred as part of an insolvency resolution process without settling statutory dues has thrown a spanner in the works for resolving key telecom sector insolvencies.
In the case of Reliance Communications and Aircel, the Committees of Creditors (CoC) have already approved resolution plans that primarily bank on the sale of valuable spectrum licences licences that cannot be transferred now without coughing up the government’s dues. According to affidavits filed during the course of the hearings, Reliance Communications owes the Department of Telecom (DoT) Rs 25,194.58 crore in adjusted gross revenue (AGR) dues, while Aircel owes Rs 12,389 crore.
Videocon Telecommunications is also undergoing the insolvency resolution process and owes another Rs 1,376 crore, but Bharti Airtel (which bought the spectrum assets in question in 2016) and the DoT are currently engaged in a legal wrangle on who should pay up the AGR dues for this portion of airwaves. For RCom and Aircel, legal experts note that the approved resolution plans no longer appear viable if the spectrum assets are no longer on the table. “Without the airwave licences, the asset balance of these companies become quite thin… It will turn out to have a substantial negative impact on the creditors, who, it should be noted, were already looking at a huge haircut.
Take away the spectrum and this is going to become even worse,” said a senior legal counsel who wished to remain unnamed. RCom’s resolution plan, approved by its creditors last year, envisages its spectrum and fibre assets going to UVARCL, while its tower assets would be taken over by Reliance Jio Infocomm. Against total claims worth Rs 57,382 crore, creditors were expecting to receive around Rs 20,000- 23,000 crore a figure that is likely to be whittled severely down without the airwaves.
In the case of Aircel, UVARCL’s resolution plan offers around Rs 19,600 crore against total claims worth Rs 58,670 crore. Lenders were to get Rs 6,630 crore through zero-coupon optionally convertible debentures and the rest as equity that would be expanded if UVARCL could not pay their dues within five years. Industry sources confirmed that UVARCL had planned to raise a large portion of money through the sale of the airwaves. Industry executives say that the matter is likely to appear before the Supreme Court again since creditors, including around 40 banks, are currently staring at monumental haircuts.
Rs 25,195cr AGR dues owed by RCom
Telcos’ AGR liability
According to government estimates, total AGR liability of Bharti Airtel is Rs 43,980 crore, Vodafone Idea Rs 58,254 crore, Tata Group Rs 16,798 crore and Reliance Jio Rs 195 crore.